Dividend income can be a critical piece of a long-term investment strategy, particularly for people who are looking to grow their portfolios steadily over the years. The stocks listed below have all increased their payouts, offer good yields, and provide investors with attractive growth opportunities in 2020 and beyond. With attractive dividend payments and reasonable valuations, any three of the stocks here could be solid additions to your portfolio today.
1. AT&T
AT&T (T -1.37%) could have a big year in 2020 as the telecom giant continues to develop its 5G network throughout the country. According to its website, AT&T 5G is up and running in 13 markets, and the company is looking to have it available nationwide before the end of the first half of 2020. The new 5G network is the next big development in Internet and promises to fuel a lot of traffic, particularly when it comes to video. AT&T projects that by 2022, around three-quarters of its mobile traffic will use the Internet for streaming 4k video as well as virtual reality and augmented reality.
That could lead to lots of big business for AT&T down the road, and it is among the major providers of 5G Internet, putting it in a good position to benefit from the growing demand for a faster mobile network. The company has a bright future, and that makes its 5.3% dividend yield look even more attractive. In December, the Dividend Aristocrat announced its 36th consecutive dividend increase as it hiked its quarterly payments from $0.51 to $0.52 per share.
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2. Gilead
Gilead Sciences (GILD -2.70%) has dozens of drugs in its portfolio that treat a variety of different diseases. While the bulk of its products relate to treating HIV and AIDS, Gilead also has drugs for liver disease, hematology, and oncology, as well as products aimed at cardiovascular issues.
While investors may be concerned that the company's sales have been dropping in recent years, what's encouraging is that Gilead has many products in development and undergoing trials, especially outside of HIV/AIDS. Cilofexor, Axicabtagene ciloleucel, Filgotinib, and GLPG-1690 are some of the company's key drugs that are in phase 3 of testing and that could be among its next products to hit the market.
As Gilead continues to make progress in the development of new drugs, there's a lot of potential for the company to grow its sales as it reaches more patients. And with strong free cash flow totaling more than $8 billion over the past four quarters, Gilead's quarterly dividend payments of $0.63 look safe for the foreseeable future.
While the company doesn't have a long history of paying dividends, going back only to 2015, it has increased them in five straight years and Gilead could make for an underrated income stock to hold for many years.
3. ExxonMobil
ExxonMobil (XOM 0.23%) is another Dividend Aristocrat to make this list, as the oil giant has increased its dividend payments for 37 straight years, averaging an annual increase of 6.2% during that time. Currently, the company pays its shareholders a quarterly dividend of $0.87 per share.
There's always going to be risk investing in oil and gas given how wildly oil prices have fluctuated over the years, with prices for West Texas Intermediate, a key benchmark in North America, ranging between $36/barrel and around $76/barrel over the past four years. However, with deeper production cuts announced by OPEC in December to help support oil prices, it should help add stability for the commodity. Production cuts have been in place since 2017, and they've been integral in keeping oil prices as stable as they have been in recent years. As long as that remains unchanged, Exxon is likely to be a safe stock to hold.
Exxon is in a very strong position today with the company posting $14.7 billion in profit over the past 12 months while generating free cash flow of $8.2 billion. With the stock trading at around 1.6 times its book value, it could be a bargain buy as it could have a lot of potential upside in 2020.
Which stock is the best buy today?
The three stocks listed above can give investors three different industries to collect dividend income from. AT&T is the best value stock of the three listed here, with a price-to-earnings ratio of 17.5. Gilead, meanwhile, may provide the most attractive returns for growth investors with the many different drugs that it has in testing that could send its share price soaring. ExxonMobil, despite the challenges in the oil and gas industry, could remain a stable buy for the foreseeable future given its size and OPEC having no appetite for a lower price of oil.
